Telemetrix sees consumer as key to renewed Zetex chip profits

UK technology group Telemetrix is continuing to have faith in consumer electronics spending as it looks to see its Zetex chipmaking subsidiary return to "acceptable" profitability in the coming financial year.

As the company published preliminary full-year results, it disclosed that analogue specialist Zetex had suffered a comparatively modest operating loss of £300000 against other chipmakers. The figure was also much better than the £700000 loss Telemetrix itself had expected last July.

Zetex's sales fell 28% to £50.8m, but Dr Colin Gaskell, chairman, said: "Renewed demand was experienced in the last four months from a wide range of portable end-product markets and from manufacturers of high quality audio and satellite broadcast equipment."

He acknowledged that Telemetrix does not foresee any short term resurgence in the communications and server sectors, but added: "Sales of consumer-related electronic products are being maintained in the major Western economies.

"This demand, combined with the growth in sales of recent introductions, should provide the basis for increased Zetex revenue in 2002 compared to 2001."

Zetex's recent and forthcoming product launches include current mirrors, single cell boost convertors and LED drivers for LCD backlighting.

During 2001, Zetex saw its sales of linear ICs fall by 21% while discretes were down 30%. Zetex also echoed other chip producers when it said that recent months have pointed to a running down in inventories that could add to renewed demand.

The chipmaker instituted cost-cutting measures that trimmed £1.2m from its budget. Total capital expenditure was &pound7.8m, including £2.5m on the company's 150mm fab constructed inside the shell of its existing site at Oldham, near Manchester.

Dr Gaskell said that Telemetrix's other main division, test and portable broadband comms kit specialist Trend, suffered from the downturn, but it still achieved a 32% growth in sales to £41.5m and an operating profit before exceptionals and amortisation of £3.8m. This was more than double its £1.5m performance in 2000.

Trend had a strong start to 2001 but its north American business suffered in the second half as companies cut capital expenditure. Some of this weakness was offset, however, by demand for its ADSL testers in other regions, particularly in Europe.

Trend also instituted cost-cutting measures during 2001 that saved £300000.

Trend is set to maintain performance this year broadly in line with last year's results, Dr Gaskell said. Modest growth is expected within the division's enterprise networks activities.

Across the whole group, Telemetrix cut capital expenditure to £9.9m from 2000's £16.9m. It expects 2001's spending level to be effectively maintained over the current financial year.

This year, Telemetrix aims to achieve "a level of profitability in 2002 that will be modestly cash generative".

"Market conditions... are expected to be broadly similar to those experienced in the second half of last year," Dr Gaskell said. "January trading was in line with this expectation."

Telemetrix total turnover reached £92.4m, down 9.5% on 2000's £102.1m. Pre-tax profit was £1.8m against &pound12.5m.